Average small business owed $11,588 in overdue debts, research reveals

Monday, 13 May 2013 12:18

Patrick Stafford

Small businesses need to be more aggressive in chasing down bad debts, the sector has been warned, with research released today showing the average SME is currently owed $11,588 in overdue debts.

The release of the Commonwealth Bank research comes just two months after Dun & Bradstreet data revealed average payment terms have remained high for small business.

The Commonwealth Bank research has found nearly two thirds of all payments are overdue and that small businesses are losing 16.5 million work hours each year in chasing small payments.

The research, which surveyed 750 small businesses, also discovered 95% of respondents said it’s vital debtors pay them on time to ensure healthy cashflow, while 78% said late payments cause them to delay payments to suppliers.

The study also found small businesses are spending on average two hours per month chasing up late payments – equating to 16.5 million hours lost across the country.

In the past 12 months, the survey found cashflow issues have caused 47% of businesses to pay invoices late, and 22% to pay staff wages late. Almost a quarter of small business owners have also previously managed a business that needed to close down.

Sue Barrett of Barrett Consulting told SmartCompany this morning the average $11,588 figure is disturbing and says small businesses need to be more aggressive when chasing up late payments.

“We recently had a company enter into a business arrangement, and this was for $40,000 worth of business. The owner has been delaying payment, and it’s extremely difficult,” she says.

“We’ve taken to the point of sending signed letters of agreement in situations such as these.”

Barrett says larger businesses are notorious for paying smaller businesses late, and says SMEs need to be more aggressive.

“You just need to have good, solid legal contracts,” she says.

“If you behave in a way which is more victim-oriented and don’t stand up for what you want, you’ll get your money later than what you want or need.”

The Commonwealth Bank survey also found New South Wales and Australian Capital Territory payment terms have the largest percentage of overdue debts at 78%, while Queensland and Victorian businesses come in at second and third, with 66% and 65% respectively.


The Courier-Mail – First with the news – May 13th 2013 © 2013 News Limited. All rights reserved.

ONE in every 660 Queenslanders is bankrupt – the worst ratio in the country – with three postcodes on the  Gold Coast hardest hit. The Insolvency and Trustee Service Australia yesterday released 2011-12 data on personal insolvency by location, showing Queensland had the highest number of bankrupts in postcodes 4211, 4209 and 4217 – all on the Gold Coast and taking in Nerang, Coomera and Surfers Paradise.

ITSA said that, in the 4211 postcode, the ratio of bankrupts to the general population was 1 to every 356 people. About 23,000 people were declared bankrupt nationally in 2011-12, 1000 fewer than the year before, with seven of the 10 worst postcodes nationally deteriorating. Mount Druitt in Sydney’s western suburbs was the bankruptcy capital, with 173 people residing in postcode 2770 personally bankrupt.The number of bankrupts in Queensland rose 2 per cent to 6544 in 2011-12, with a 2.1 per cent rise in Greater Brisbane and 1.9 per cent across the rest of Queensland. Gold Coast Mayor Tom Tate said the area was particularly hard-hit during the global financial crisis, with unemployment putting financial pressure on many families. “With rates increases at a 12-year low and unemployment lower than the regional average, I expect things have already turned around and that will be reflected in next year’s figures,” Mr Tate said.

FTI Consulting senior managing director Stefan Dopking said the Gold Coast had always had high numbers of personal bankruptcies, but since the GFC there were more small businesses going broke up and down the coast. “People are cutting back, trying to pay off their mortgages quicker and not going out and spending as much as they would,” he said. “That has a direct impact on the corporate and SME sectors and that’s the Gold Coast – small businesses surviving off the tourism market. They’re all suffering.”

Social analyst David Chalke said he believed the data highlighted the struggles of self-employed and owner-operators in these regions. “Its the not the high-profile cowboys,” he said